AGAINST "PEAK TIME MEDALLIONS"
In the San Francisco Taxi Industry
by Christopher Fulkerson
As we all know, or as we are all supposed to know, business cycles vaccillate between times that are called "buyer's markets" and times that are called "seller's markets."
Both buyers and sellers use different tactics during these different times, but basically, during buyer's markets, the sellers have to sell at lower prices, and/or provide extra incentives, or simply deal with getting less business; and during seller's markets, the buyers have to accept that they will pay more, and/or deal with less availability of the goods or services they require. Every business, every industry vaccillates between these two types of markets. Without this constant recurrent back-and-forth, before long the worst of all possible situations prevails, in which either prices go up and stay up, during which time there is usually not much business; or availability goes down and stays down. This is very simply expressed, basic economic fact, so prevalent that there is nothing theoretical about it. We have all witnessed this sort of thing. We all experience it every day.
In San Francisco from time to time there are people who put forward the idea that there ought to be "peak time" taxi medallions, so that during times when there is an apparent scarcity of cabs, there would be a sudden flood of them, thus "solving" the problem of that supposed scarcity of cabs.
The first mistake that this idea involves is the assuption that more cabs would mean greater availability of cabs. But cabs are not like loaves of bread on a shelf, that will be there if you go to find them. Cabs are mobile, and more of them does not get one to you when you need one.
Dispatch is the method by which cabs are gotten to their customers. More cabs will never mean greater availability of cabs. Better dispatch, that is, getting the cabs to where they're needed at the very moment they're needed, is the real solution to the problem of cab availability. Taxi magic is all about communication, not location.
The second major mistake that the idea of "peak time" medallions involves is the one involving buyer's and seller's markets, or, in the case of the cab industry, what we could call "Driver's" and "Passenger's" markets.
While there are ups and downs in the yearly business cycle, basically, the business cycle in the taxi industry is weekly. The "driver's markets" that are most reliable for the drivers tend to form around the weekend night shifts. The slowest shifts are often Sunday or Monday nights, though a rainy Sunday morning can be pretty slow.
Restaurants do not open for Friday and Saturday night dinner service only, just because there are more people who want to go out to eat at those times. A restaurant that was only opened during conventional mealtimes would either be economically unviable, or it would be incredibly expensive. So expensive that solving the problem of feeding everybody at the same time would not be economically viable. So nobody thinks that there should be "peak time" restaurants, or gas stations. Everybody accepts that movies on Friday night are more expensive, and cinemas accept that matinees fetch a lower ticket price. Everybody accepts packed restaurants and bars at mealtimes and socializing times. That's how the world turns.
If there were "peak time" medallions, there would be a lot of problems created, such as economic problems, but there would be even more serious problems, such as safety problems, that would ensue.
First, the economic problems. Then, the safety problems, which I want to save for last, since they are what I really want you to remember.
In order to provide "peak time" taxi service, cab companies would have to buy automobiles that would only be used during those peak times. That's a huge expense for only a VERY small return. Such a business move would not be smart. Cab executives link their profit to the number of miles a vehicle is driven. "Peak time" cabs would be a liability, not a money maker. There would also be the problem of storing the cabs during that majority of the time they were not used. Remember, that restaurant only open at peak times would still have to be paying rent on the property while it was closed. Car payments would still have to made while the cab was sitting in the lot. And oh, the lot would have to be bigger...
Then, there is a serious safety issue, that would be built into the weekly business cycle. The safety issue would be perpetual.
The cab company's repair shop would be put under huge stress to make sure that the whole, expanded fleet would be on the road by that hour or that day of the week that the "peak times" are imagined to exist. The cab companies would, understandably, be reluctant to hire more staff for this, and if for no other reason than human error, there would be gaffes in the quality of the repair work. But remember, the companies would be highly unlikely to buy more cabs for these "peak times." The cabs that would go out on the road would be the company "spares," the cabs usually not sent out unless the regular cabs are themselves in the shop. Of course, spare cabs don't go out unless they are in good repair. But it must be realized that the cabs that would go out would be these older, generally more run-down cabs, and, significantly, they would have been given a hasty repair job before going out. These problems would exist if there were never, ever any unscrupulous drivers or cab companies. But at certain companies, a driver would walk over to the shop line, see that the shop tag read something they were "willing" to put up with, and take the cab out, against the previous driver's recommendation, without even showing it to the mechanic. That means that one driver would be assuming that the mechanical knowledge of the previous driver was even up to speed. Many drivers would bow to peer pressure, and say to the next driver, "Just be sure to shop it for brakes at the end of the shift." This driver would then take the cab out onto the road.
This kind of compromise in safety standards would become common.
We cab drivers often think that the public doesn't care whether we make it. We know our industry is a political football whereby the politicians buy votes by seeming to "provide a service" to the public. But "peak time" medallions would not only reduce the income of the regular drivers, by denying them their naturally competitive hours, and give no motivation for good drivers to drive: it would be an economic stress on the companies that they should not prefer to risk, and it would pretty much guarantee a serious drop in passenger safety.
And the basic problem would not be solved. There would not be more cabs where they were wanted, when they were wanted. Remember, that's a dispatch problem. More cabs on the street does NOT guarantee more cabs for the passengers.
If you want greater availability of cabs, allow a link between company profitability and quality of dispatch. I said COMPANY profitability, not driver profitability. You'll then see cab availability skyrocket all at once. And you won't need any more cabs.
First posted 2/6/2010.